NOVA debt recoups losses; Spectrum loan gains, bonds mixed; Wynn notes drop, Station Casinos stable

By Stephanie N. Rotondo

Portland, Ore., Feb. 4 - It was "another crazy day" in NOVA Chemicals Corp.'s bonds, a trader said Wednesday, as news broke that the company was very close to securing additional funding.

Traders saw the company's bonds gain as much as 15 points on the day, following a loss of about that much in the previous session. The debt had lost ground on Tuesday because investors were concerned that NOVA would not be able to meet its additional funding requirements. But come Wednesday, those fears seemed to be allayed.

Meanwhile, Spectrum Brands Inc.'s term loan continued to post gains following the bankruptcy-filing announcement late Tuesday. But traders gave mixed reviews in the bonds, with some seeing the notes fall from the highs.

In the gaming arena, Wynn Las Vegas LLC said late Tuesday it would cut salaries and hours of its employees in an effort to reduce spending. Investors reacted negatively to the news - "You don't know when the business climate will improve," one trader remarked - and pushed the casino operator's bonds lower. But investors reacted little to word that Station Casinos Inc. was considering a prepackaged bankruptcy to deal with its debt load.

NOVA debt recoups losses

NOVA Chemicals' debt continued its gyrations throughout Wednesday's session - only this time, the bonds went higher. Traders saw the 7.4% notes coming due in April gain as much as 20 points intraday, though they ended slightly lower from the highs. The gains were attributed to news that the company might be close to obtaining the additional financing required by lenders.

One trader placed the issue around 70, a gain of 15 points on the day.

"So that had a little oomph to it," he said.

Another trader saw the bonds open at 54 bid, higher than the previous closing levels around 50. The bonds then got as high as 76 before coming back to close around 70.

"A little volatility there," he remarked.

Another source called the 6½% notes due 2012 more than 10 points better at 38 bid.

News reports indicated that the Canadian chemical maker had agreed to sell $100 million in bonds to Alberta Investment Management Corp., a pension plan. Reports also stated that the Alberta government owned ATB Financial might be interested in helping out the company. NOVA officials declined to comment on the rumors.

NOVA must secure $100 million by Feb. 28 to appease lenders and to meet debt covenants. NOVA must then raise an additional $100 million by June 1.

Still, the news did not stop Moody's from downgrading NOVA, which Fitch Ratings and Standard & Poor's had already done earlier in the week.

Spectrum loan up, bonds mixed

Spectrum Brands' term loan continued to climb Wednesday in reaction to the news of the company's Chapter 11 filing on Tuesday, according to a trader.

The term loan was quoted at 68 bid, 68¾ offered, up from Tuesday's closing levels of 65½ bid, 66½ offered, the trader said. A different trader had the term loan going out on Tuesday at 66 bid, 68 offered.

The trader said that the term loan opened as low as 64 bid, 65 offered on Wednesday but then it jumped back up as the day progressed.

When asked why it opened lower, the trader responded that he wasn't sure, but guessed that there might have been some selling pressure early on and then some more buyers stepped in to the market, alleviating the pressure and pushing levels higher.

In the bonds, one market source called the 7 3/8% notes due 2015 7.5 points better at 25.5 bid. At another desk, a trader saw that issue open around 30, where it had jumped to on Tuesday following news of the bankruptcy filing, only to fall to 27. At the close, he quoted the bonds at 25 bid, 28 offered.

Yet another trader pegged that paper at 25 bid, 27 offered.

"They traded up last night to 30 bid, 31 offered, but they came off those highs," he said.

Holders of roughly 70% of Spectrum's outstanding public notes have already agreed upon spectrum's prepackaged reorganization plan, which was filed with the bankruptcy court on Tuesday.

Under the plan, existing bond obligations in a principal amount of $1.05 billion would be canceled and noteholders would be issued new bonds in an aggregate principal amount equal to 20% of the total unpaid principal and interest on existing bonds together with shares of new common stock.

The claims of existing secured and other general unsecured creditors would be reinstated or unimpaired, and, therefore, payment of the claims would be received on existing terms either in the ordinary course or upon consummation of the plan.

Existing common stock will be extinguished under the plan, and no distributions will be made to holders of the current equity.

As a result of the reorganization, the company expects to reduce its balance sheet debt by approximately $840 million, eliminate approximately $95 million in annual cash interest payments for at least each of the next two years and free up additional cash.

In connection with the bankruptcy filing, Spectrum Brands has received commitments for a $235 million 12-month debtor-in-possession facility and is currently seeking court approval of this financing.

The commitments came from certain of its existing asset-backed facility lenders, with a participating interest from certain existing noteholders, and Wachovia Bank is acting as the agent on the deal.

Tranching on the deal comprises a $190 million revolver priced at Libor plus 450 basis points and a $45 million asset-based revolver supplemental loan priced at Libor plus 1,450 bps.

Spectrum Brands is an Atlanta-based consumer products company.

Wynn drops, Station stable

The gaming sector ended softer Wednesday, following a string of negative news.

First up, Wynn Las Vegas' debt traded actively and lower as the company announced it would cut salaries and halt its 401k match program. A trader quoted the 6 5/8% notes due 2014 at 70 bid, 72 offered. He added that the issue had been "creeping down from the 90s since December."

"They're doing what they have to do," he said. "The equity holders are getting killed."

But another trader deemed the bonds essentially unchanged at 71.25, with about $40 million trading.

The casino operator announced that it would slash salaries and reduce work weeks for full-time hourly employees, a move aimed at helping people keep their jobs while still allowing the company to reduce spending. The plan is expected to save Wynn $75 million to $100 million a year.

"In effect, everybody makes a little bit less money, but everyone keeps their job," Steven Wynn, chairman and chief executive, told analysts and investors during a conference call. "We don't want anybody on unemployment here."

Meanwhile, Station Casinos' is considering a prepackaged bankruptcy to deal with its debt load. But traders saw little movement in the bonds on the back of the news.

One trader placed the bonds at 2 bid, 3 offered, noting that a "scrappy" trade went through toward the offer side. He added that the debt was still trading with accrued interest.

Another trader quoted the issue at 2 bid, 5 offered and the 7¾% notes due 2016 at 23 bid, 25 offered.

Under the proposed plan, Station would give investors 10 cents to 50 cents on the dollar in new notes and cash in exchange for the nearly $2.3 billion of existing debt. Some lenders have already agreed to the plan. However, in order for the plan to proceed, two-thirds of senior noteholders and two-thirds of subordinated noteholders must approve.

Elsewhere in the sector, MGM Mirage's bonds "were down a lot," according to one trader. He saw the 6½% notes due 2009 at 88 bid, 89 offered versus levels of 93 bid, 94 offered on Tuesday. He added that the decline came on the heels of a downgrade from Moody's on Tuesday.

Aleris loan slides

Aleris International Inc.'s term loan took a noticeable hit in the secondary market as the company held a private call during the session, according to a trader.

The term loan was quoted at 22½ bid, 25½ offered, down from previous levels of 36 bid, 38 offered, the trader said.

The trader remarked that following the call, rumors started floating around that the company discussed a prepackaged plan of reorganization or some sort of bankruptcy filing with the call participants.

Term loan levels fell as a result of this chatter since the debt holders are scared to lose assets to the asset-based revolver, the trader explained.

Aleris is a Beachwood, Ohio-based producer of aluminum rolled products and extrusions, aluminum recycling and specification alloy.

Also, Swift Transportation Co. Inc.'s term loan B headed upward in trading following the release of earnings results to lenders, according to a trader.

The term loan B was quoted at 48 bid, 49 offered, up from Tuesday's levels of 45½ bid, 48½ offered, the trader said.

Swift Transportation is a Phoenix-based truckload carrier.

Broad market unchanged, better

Freeport-McMoRan Copper & Gold Inc.'s 8 7/8% notes due 2014 were once again active, traders reported, with about $30 million changing hands. One trader called the notes unchanged at 85.25.

"That bond, if it was a woman I'd marry it," the trader quipped, citing the heavy volumes that have been trading of late.

But another trader called the debt a little better at 85, up a point.

First Data Corp.'s 9 7/8% notes due 2015 were "up a couple points," a trader said, at 59.5 bid, 60.5 offered.

About $15 million of GMAC LLC's 5 5/8% notes due 2009 traded, a trader said, at 95.5. He deemed that about unchanged on the day.

The trader also saw $13 million of Ford Motor Co.'s 9¾% notes due 2010 trade at 82.625, while $10 million of the floating-rate notes due 2012 traded at 62.125, both unchanged.

Sara Rosenberg contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.